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House Judiciary Committee Holds Hearing on Marketplace Fairness Act

March 13, 2014SC&H Group

On Wednesday, March 12th the House Judiciary Committee held a hearing on the Marketplace Fairness Act (MFA). This bill, which has already been passed by the Senate, seeks to level the playing field for retailers with a physical presence in a state by imposing sales tax collection responsibilities on remote, online sellers.

A portion of the hearing’s debate centered on origin based tax collection. This concept would allow the remote online retailer to charge sales tax to its customers based on where it is located, rather than charging sales tax based on the customer’s location. This would greatly simplify the online seller’s collection responsibility by allowing it to charge and collect tax in one jurisdiction instead of up to 9,600 jurisdictions.

While this method of tax imposition and collection would mirror that of brick and mortar stores, there was opposition voiced to the idea. Some opposition arguments were more procedural, stating that this method of tax collection would upend the current destination-based system while other arguments were more practical saying that businesses could avoid imposing and collecting tax merely by moving to a state that doesn’t impose a sales tax.

Consensus was not reached with Committee Chairman Bob Goodlatte (R-Va.) saying the purpose of the hearing was “to start winnowing down the proposals” in an attempt to work toward an alternative to the Senate bill. With an estimated $23 billion in tax revenue not being collected annually, and states looking for dollars to support tax cuts or new investments, it’s certain that more work will have to be done before a compromise is reached.

Wednesday’s hearing shows that the House Judiciary Committee is far from producing a bill that mirrors the Senate’s version of the MFA. And while there are very passionate arguments being made on both sides of the issue, it is also an election year. Therefore, we believe that progress will be slow and measured, and compromise with the Senate bill is still highly uncertain.